Notice to Public - Investment Industry Regulatory ...€¦without further notice to you and in your...

Notice to Public│ Contested Hearing

June 12, 2007 No. 2007-007

Suggested Routing • Trading • Legal and Compliance

DAVID BERRY

Relevant UMIR Provisions • 6.4 [Trades to be on a marketplace]

• 7.7(5) (pre-May 2005 version) [Restrictions on Trading by a Participant Involved in a Distribution]

Summary Commencing on October 29, 2007 for five (5) days, an RS Hearing Panel will convene at RS, 9th floor, 145 King Street West, Toronto to consider whether David Berry has contravened certain Requirements of UMIR as set out in the Statement of Allegations. The proceeding is open to the public.

Links

• Notice of Hearing

• Statement of Allegations

• Schedule A

• Schedule B

• Schedule C

Questions / Further Information For further information or questions concerning this notice contact:

Melissa J. MacKewn Acting Chief Enforcement Counsel, Eastern Region

Telephone: 416.646.7229

Fax: 416.646.7285

e-mail: [email protected]

IN THE MATTER OF

THE UNIVERSAL MARKET INTEGRITY RULES

AND

IN THE MATTER OF DAVID BERRY

AMENDED NOTICE OF HEARING

TAKE NOTICE that commencing on October 29, 2007 for five (5) days, Market Regulation Services Inc. (“RS”) will hold a hearing pursuant to Part 9 of Policy 10.8 of the Universal Market Integrity Rules (“UMIR”) at the offices of RS, at 145 King Street West, 9th Floor, Toronto, Ontario. The hearing is open to the public.

THE PURPOSE OF THE HEARING is to determine whether you have contravened the following Requirements of UMIR, by reason of the allegations set out in the Statement of Allegations annexed as Appendix “A” hereto and such additional allegations as counsel may advise and the Hearing Panel permit:

1. Between June 3, 2004 and April 18, 2005, you solicited client orders during the distribution

period for new issue securities which resulted in Scotia Capital contravening UMIR 7.7(5)

(pre-May 2005 version) on 11 occasions, for which you are liable pursuant to UMIR 10.3(4);

and

2. Between June 3, 2004 and April 18, 2005, you conducted trades that were not printed on a

marketplace or recognized exchange which resulted in Scotia Capital contravening UMIR

6.4 on 10 occasions, for which you are liable pursuant to UMIR 10.3(4).

AND TAKE FURTHER NOTICE that if the Hearing Panel finds that you have contravened the Requirements above, the Hearing Panel may impose one or more of the following orders under UMIR 10.5:

1. a reprimand;

2. a fine not to exceed the greater of:

(a) $1,000,000 per contravention of a Requirement; and,

(b) an amount equal to triple the financial benefit which accrued to you as a result of committing each contravention.

3. a restriction, suspension or revocation of access to the marketplace for such period and upon such terms and conditions, if any, considered appropriate; and

4. any other remedy determined to be appropriate under the circumstances.

AND TAKE FURTHER NOTICE that under UMIR 10.7 the Hearing Panel may assess the expenses incurred by RS as a result of the investigation and proceedings resulting in the order.

AND TAKE FURTHER NOTICE that you have the right to appear and be heard at the hearing. Under Section 9.1 of UMIR Policy 10.8, you are required to serve a Reply. If you fail to serve a Reply, or to attend or participate at the hearing, the Hearing Panel may proceed with the hearing on the matter on the date and at the time and place set out in this Notice of Hearing without further notice to you and in your absence, and the Hearing Panel may accept the facts alleged or conclusions drawn in the Statement of Allegations as having been proven and the Hearing Panel may impose any one or more of the penalties or remedies authorized by UMIR and assess expenses as authorized by UMIR.

DATED at Toronto, Ontario this 12th day of June, 2007.

Market Regulation Services Inc. Suite 900, Box 939 145 King Street West Toronto, Ontario M5H 1J8 Investigations and Enforcement Telephone: 416-646-7229 Facsimile: 416-646-7285

To: Ms. Linda Fuerst Lenczner Slaght Royce Smith Griffin LLP 130 Adelaide Street W., Suite 2600 Toronto, Ontario M5H 3P5 Telephone: (416) 865-3091 Fax: (416) 865-9010

2

APPENDIX “A”

IN THE MATTER OF THE UNIVERSAL MARKET INTEGRITY RULES

AND

IN THE MATTER OF

DAVID BERRY

STATEMENT OF ALLEGATIONS

I. REQUIREMENTS CONTRAVENED

1. RS alleges that between April 4, 2002 and April 18, 2005, David Berry

(“Berry”):

(i) engaged in conduct which resulted in Scotia Capital contravening

UMIR 7.7(5) (pre-May 2005 version) on 39 occasions; and

(ii) engaged in conduct which resulted in Scotia Capital contravening

UMIR 6.4 on 15 occasions.

2. UMIR came into effect on April 1, 2002. Effective January 30, 2004, UMIR

was amended to add Section 10.3(4) which provides that an individual

employed by a Participant who engages in conduct resulting in the Participant

contravening UMIR may be found liable for the conduct and sanctioned

accordingly. As a result, from and after January 30, 2004, Berry can be found

personally liable for causing Scotia Capital to solicit the client orders and

conduct the off-marketplace trades referred to herein. In respect of the

solicitations, 11 took place after January 30, 2004. In respect of the off-

marketplace trades, 10 took place after January 30, 2004.

3. Only Scotia Capital can be found liable for conduct occurring prior to January

30, 2004 which resulted in a breach of UMIR 6.4 or 7.7(5).

4. Schedule “B” sets out the text of the relevant UMIR Requirements.

5. In the alternative to the Requirements of UMIR alleged to have been

contravened above, RS relies upon the relevant Requirements in the Rules of

the Toronto Stock Exchange (the “TSX Rules”). Specifically, RS alleges that

by engaging in the improper solicitations referred to herein, Berry caused

Scotia Capital to breach TSX Rule 4-303 on 39 occasions. Each and every

instance of such conduct was in contravention of TSX Rule 7-106(1)(b). RS

further alleges that by engaging in the improper off-marketplace transactions

referred to herein, Berry contravened TSX Rules 4-101 and 4-102 on 15

occasions.

6. Schedule “C” sets out the text of the relevant TSX Rules.

II. RELEVANT FACTS AND CONCLUSIONS

Overview

7. In late spring 2005, RS conducted a trade desk review at Scotia Capital. The

review raised questions by RS with respect to a short position held in Berry’s

inventory account (the “08 account”) for the Preferred Share Trading Desk

(“the Preferred Desk”).

8. Scotia Capital subsequently initiated an internal review of the 26 initial public

offerings in preferred shares (“new issues”) in which Scotia Capital was

involved in the period March 2003 to April 2005. Scotia Capital identified

possible breaches of UMIR 6.4 by Berry and his assistant, McQuillen, in

relation to these new issues. Scotia Capital reported the results of its internal

investigation to RS.

2

9. On the basis of the Scotia Capital review, RS conducted an expanded

investigation into new issues in which Scotia Capital was involved in the

period April 2002 to April 2005 which resulted in the findings below.

10. In the period April 4, 2002 to April 18, 2005 (the “Relevant Period”), Berry and

McQuillen engaged in a pattern of trading as described in paragraph 23 below

(the “Trading”) which consisted of Berry and McQuillen:

(i) soliciting client orders during the distribution of new issues by Scotia

Capital contrary to UMIR 7.7(5) (as it existed prior to May 2005); and

(ii) conducting off-marketplace trades that were not printed on a

marketplace or recognized exchange, contrary to UMIR 6.4.

11. The Trading involved 16 new issues of preferred shares and 20 different

clients.

The Preferred Desk

12. During the Relevant Period, Berry was the Head of Preferred Trading and the

registrant responsible for trading Scotia Capital’s proprietary book of preferred

shares.

13. Berry was employed at Scotia Capital from October 1995 until June 30, 2005.

During his employment at Scotia Capital, Berry held the following positions and

obtained the following securities industry registrations:

(a) Vice-President;

(b) Director;

(c) Registered Representative Non-Retail (March 1996) as sales associate,

preferred shares; and

(d) Institutional Equity Research Associate.

3

14. Berry qualified as a Chartered Financial Analyst in 1998 and completed the

Conduct and Practices Handbook examination in January 1996.

15. McQuillen was Berry’s assistant on the Preferred Desk during the Relevant

Period. McQuillen was a fully licensed agency trader. McQuillen has not

worked at Scotia Capital since September 22, 2005.

16. Berry was McQuillen’s immediate supervisor. McQuillen assisted Berry in all

aspects of his trading activities, including speaking with clients, completing

trade tickets, entering both client trades and inventory trades and assisting

with the administrative responsibilities on the Preferred Desk.

17. Both Berry and McQuillen traded for the 08 account each under their own

individual identification number.

18. Berry approved all trades entered by McQuillen for the 08 account. When

Berry was away from the office, McQuillen entered orders and kept Berry

advised of such orders while he was away or upon his return to the office.

19. McQuillen prepared the trade tickets related to the solicitations of client orders

and off-marketplace trades in question. An audit trail of the Trading exists at

Scotia, stemming from the tickets.

20. During the Relevant Period approximately 2,000 trade tickets were processed

daily for Scotia Capital’s Institutional Equity Desk, which included the

Preferred Desk. The settlements area reconciled the trading within Scotia

Capital on a daily basis, including the Preferred Desk. As part of its regular

compliance monitoring and testing, Scotia Capital reviewed trade tickets

through random sampling. Because of the random nature of ticket selection,

none of the 39 tickets generated by the Trading formed part of the sampling.

21. During most of the Relevant Period, Berry’s compensation generally

consisted of a base salary and an incentive plan of 20% of the sum of

4

commissions, new issues sales credits and trading profits and losses

generated by him in trading for the Preferred Desk.

22. During the Relevant Period, McQuillen’s compensation consisted of an annual

base salary. His incentive plan did not include a percentage component and

was fully discretionary.

Solicitation of Purchase Orders and Off-marketplace Trades

23. The Trading consisted of the following:

(a) During the Relevant Period, Berry and McQuillen solicited Canadian

client buy orders in the new issues on or about the dates the new issues

were publicly announced. Clients agreed to pay the distribution prices

for the new issues. This was prior to the date on which the securities

were assigned a CUSIP number and the new issue began trading on

the TSX. McQuillen completed the trade tickets and generally time-

stamped them on the dates of the solicitations. These solicitations

resulted in contraventions of UMIR 7.7(5) (as it existed prior to May

2005).

(b) McQuillen kept the trade tickets at the Preferred Desk until the first day

of trading for the shares (the next business day after the new issues

were listed).

(c) On the first day of trading, Berry and McQuillen conducted off-

marketplace trades in the newly listed shares by selling them short from

the 08 account to clients at the distribution price. The trades were not

printed on a marketplace or organized regulated market. McQuillen

time-stamped the trade tickets again or in some cases, for the first time.

In some cases, McQuillen made a handwritten notation on the ticket

instead of using a time stamp, indicating a trade on the first day of

trading for the newly listed shares.

5

(d) McQuillen then sent the trade tickets to the trade processing area.

(e) Berry and McQuillen subsequently covered the short positions in the

newly listed shares created in the 08 account by buying shares in the

marketplace, either on the first day of trading for the newly listed shares

or at a later date or dates.

(f) This conduct resulted in Scotia Capital failing to conduct 15 trades by

way of entry of an order on a marketplace as required by UMIR 6.4 or

pursuant to any exception or exemption in respect thereof.

(g) The client confirmation notices for the 15 off-marketplace trades stated

that the trades were conducted on the first date the securities began

trading, with the majority of them noting that Scotia Capital acted as

principal, although the trades were not printed.

24. In some cases during the Relevant Period, Berry solicited buy orders in the

new issues for more shares than were ultimately received by the 08 account

from the Syndication Desk. In other cases, Berry solicited client buy orders in

the new issue shares when no allocation was ultimately received in the 08

account from the Syndication Desk.

25. Twenty four of the client orders which Berry and McQuillen solicited during the

distribution period resulted in trades before the security was listed, and were

therefore traded in the “grey market”.

26. During the Relevant Period there were instances in which Berry and/or

McQuillen forwarded clients’ tickets for a new issue to the Syndication Desk

and, as a result, these clients received new issues shares from Syndication

according to standard distribution practices.

27. Schedule “A” provides further particulars of the violations of UMIR 7.7(5) and

6.4.

6

Effect of the Trading Strategy on Scotia Capital’s Clients and Market Integrity

28. In the 15 instances of off-marketplace trades, the syndication process was by-

passed and, as a consequence, clients purchased newly listed shares from

the secondary market through the 08 account. Because clients did not

receive new issue shares from the primary market through the Syndication

Desk, pursuant to a prospectus, they were deprived of all the inherent rights

afforded to such purchasers.

29. Some clients were aware that they would be receiving shares in the new

issue at the distribution price from a transaction with the 08 account which

might result in a profit to the 08 account. Some were not.

30. The majority of the new issue shares involved in the Trading traded in the

secondary market at prices lower than the distribution price paid by the clients

and never reached the distribution price before any short positions in the 08

account were subsequently covered. Accordingly, the 08 account profited

from its short positions in these shares.

31. By filling client orders by means of the Trading, Berry was not restricted to the

allocation formula or guidelines used by Scotia Capital in the normal

syndication process. This increased Berry’s opportunity for profit and

generated goodwill from clients.

32. The overall profit to the 08 account from shorting the shares was $713,959.

Berry received 20% of the profit or $142,792. Scotia Capital’s profit was

therefore $571,167.

33. The off-marketplace trades precluded other market participants from seeing

those trades printed on a marketplace or organized regulated market and

resulted in a lack of transparency to other market participants. Transparency

is a cornerstone of the maintenance of market integrity.

7

34. Market participants had no knowledge of Berry and McQuillen selling shares

in the new issue to clients once the shares opened for trading. They only saw

Berry and McQuillen buying the shares, which is consistent with an

accumulation strategy. This had the potential to mislead other market

participants as to the true nature of the demand for the stock, and affect their

subsequent investment decisions.

III. SUMMARY

35. The Trading directed by Berry breached UMIR, disregarded Scotia Capital’s

obligations under the syndication process and resulted in potential harm to

Scotia Capital’s clients and a lack of transparency in the marketplace.

February 20, 2007

Market Regulation Services Inc. Suite 900, Box 939 145 King Street West Toronto, Ontario M5H 1J8 Investigations and Enforcement Telephone: (416) 646-7229

Facsimile: (416) 646-7285

To: David Berry c/o Ms. Linda Fuerst Lenczner Slaght Royce Smith Griffin LLP 130 Adelaide Street W., Suite 2600 Toronto, Ontario M5H 3P5 Telephone: (416) 865-3091 Fax: (416) 865-9010

8

SCHEDULE “A”

FURTHER PARTICULARS OF THE UMIR VIOLATIONS

Solicitations 1 and 2 – April 2005 - George Weston III (WN.PR.C) 1. On April 4 and 5, 2005, Berry and McQuillen solicited an order from client 1 to buy

12,000 shares of WN.PR.C @ $25.00 per share. 2. On April 4, 2005, Berry and McQuillen solicited an order from client 2 to buy

30,000 shares of WN.PR.C @ $25.00 per share. Trades 1 and 2 - April 2005 – WN.PR.C

1. On April 18, 2005, client 1 bought 12,000 shares of WN.PR.C @ $25.00 per share in a principal trade with the 08 account.

2. On April 18, 2005, client 2 bought 30,000 WN.PR.C @ $25.00 per share in a principal trade with the 08 account.

• The trades were not printed on the TSX.

• The trades were confirmed as a principal trades conducted on April 18, 2005.

Chronology

Date/Time Event

April 4, 2005

• Press Release.

• Berry and McQuillen solicited an order from client 2 to buy 30,000 shares of WN.PR.C @ $25.00 per share.

• Berry advises client 2 “okay, we’re just doin’ it off of our stock”…”if you care on that or not. Like some guys just like not to be seen”.

10:04:19 • A buy ticket for 30,000 WN.PR.C was time-stamped by McQuillen.

April 4/5, 2005 • Berry and McQuillen solicited an order from client 1 to buy 12,000 shares of WN.PR.C @ $25.00 per share.

April 5, 2005 10:47:26

• A buy ticket for 12,000 WN.PR.C shares @ 25.00 for client 1 was time-stamped by McQuillen.

April 11, 2005 • Final prospectus receipted.

April 15, 2005 5:01 p.m.

• WN.PR.C. was listed.

April 18, 2005 • The trade date of April 18, 2005 was written on the ticket for each client by McQuillen.

• The 08 account sold 30,000 WN.PR.C to client 2 @ $25.00.

• The 08 account sold 12,000 WN.PR.C to client 1 @ $25.00.

• The 08 account received an allocation of 21,300 shares of WN.PR.C @ $25.00 from Syndication.

9:30:00 • WN.PR.C began trading on TSX; it opened @ $25.00 (which was the high of the day) and closed @ $24.35.

• The trades between the 08 account and clients 1 and 2 did not appear on the TSX trading data.

Profit/Loss

• The 08 account did not trade WN.PR.C on the TSX on April 18, 2005.

• As a result of its allocation and its sells to clients 1 and 2, the 08 account was short 20,700 WN.PR.C as of April 18, 2005.

• The short position in the 08 account was covered by July 6, 2005 at a loss of $4,690.

Solicitation 3 – February 2005 - National Bank of Canada Series 16 (“NA.PR.L”)

3. On February 24, 2005, Berry and McQuillen solicited an order from the client to buy 25,000 shares of NA.PR.L @ $25.00 per share.

Trade 3 - March 2005– NA.PR.L

3. On March 15, 2005, the client bought 25,000 shares of NA.PR.L @ $25.00 per share in a principal trade with the 08 account.

• The trade was not printed over the TSX.

2

Chronology

Date/Time Event

Feb 24, 2005 • Press Release.

• Berry and McQuillen solicited an order from the client to buy 25,000 shares of NA.PR.L @ $25.00 per share.

• Berry stated to the client, “and nobody’ll see that, like that’ll just be uh, that won’t go on the book, that’ll just be from us. And later, Berry states, “and then again, nobody’ll know that you’ve done this, like it’s just coming off my stock”.

• Syndication agreed Berry could take 100,000 shares of NA.PR.L. but this did not transpire.

March 7, 2005 • Final prospectus receipted.

March 14, 2005 5:01 p.m.

• NA.PR.L was listed.

March 15, 2005 8:51:48

• A buy ticket for the client for 25,000 NA.PR.L @ $25.00 was time-stamped by McQuillen.

• The trade date on the ticket was written in by McQuillen as March 15, 2005.

• The 08 account sold 25,000 NA.PR.L shares to the client @ $25.00.

9:30:00 • NA.PR.L began trading on TSX; it opened @ $24.00 (the high for the day) and closed @ $23.86.

• The trade between the 08 account and the client did not appear on the TSX trading data.

Profit/Loss

• No trades were executed for the 08 account in NA.PR.L on the TSX on March 15, 2005.

• The 08 account was short 25,000 NA.PR.L at the close on March 15, 2005.

• The short position in the 08 account was covered by June 12, 2005.

3

• The profit to the 08 account on the NA.PR.L trading was $4,435.

Solicitations 4, 5 and 6 – March 2005 – CIBC Series 30 (“CM.PR.H”) 4. On February 24, 2005, Berry and McQuillen solicited an order to purchase

from client 1 to buy 100,000 CM.PR.H @ $25.00 per share. 5. On February 24, 2005, Berry and McQuillen solicited an order to purchase

from client 2 to buy 15,000 CM.PR.H @ $25.00 per share. 6. On February 24, 2005, Berry and McQuillen solicited an order to purchase

from client 3 to buy 75,000 CM.PR.H @ $25.00 per share.

Trades 4 and 5 - March 2005 – CM.PR.H

4. On March 10, 2005, client 1 bought 15,000 shares of CM.PR.H @ $25.00 per share in a principal trade with the 08 account.

5. On March 10, 2005, client 2 bought 100,000 shares of CM.PR.H @ $25.00 per share in a principal trade with the 08 account.

• The trades were not printed over the TSX. Chronology

Date/Time Event

Feb 24, 2005 • Press Release.

• Berry and McQuillen solicited orders @ $25.00 per share from client 1 to buy 100,000 shares of CM.PR.H, from client 2 to buy 15,000 shares of CM.PR.H and from client 3 to buy 75,000 shares of CM.PR.H.

• Client 3 is the same client referred to in trade 3 above. See Berry’s February 24, 2005 statements to the client in trade 3 regarding the source of the shares.


March 7, 2005 • A buy ticket for client 2 was prepared without quantity, price or symbol by McQuillen.

• The trade to client 3 was transacted in the grey market and confirmed to client 3 as transacted on this date.

4

March 9, 2005 12:56:15

5:01 p.m.

• A buy ticket for client 1 for 100,000 CM.PR.H @ $25.00 was time-stamped.

• CM.PR.H was listed.

March 10, 2005 8:49:13.

• The buy ticket for client 1 was stamped a second time by McQuillen.

8:49:22 • A buy ticket for client 2 to buy 15,000 CM.PR.H @ $25.00 was time-stamped by McQuillen.

• The 08 account sold 100,000 CM.PR.H to client 2 @ $25.00.

• The 08 account sold 15,000 CM.PR.H to client 1 @ $25.00.

9:30:00 • CM.PR.H began trading on TSX; it opened @ $24.00 and closed @ $24.05 with a high of $24.10.

• The trades with the clients 1 and 2 did not appear on the TSX trading data.

Profit/Loss

• The 08 account was short 190,000 CM.PR.H shares as of March 10, 2005 as a result of selling to these 3 clients.

• Throughout the day on March 10, 2005, McQuillen sold short 2,000 CM.PR.H for the 08 account and also bought a total of 249,700, on the TSX, leaving the account with a long position.

• The profit to the 08 account on the trading of CM.PR.H was $188,100. Solicitation 7 – March 2005 - Bank of Nova Scotia Series 13 (“BNS.PR.K”) 7. On March 1, 2005, Berry and McQuillen solicited an order from the client to

buy 200,000 BNS.PR.K @ $25.00 per share. Trade 6 - March 2005 – BNS.PR.K 6. On March 15, 2005, the client bought 200,000 BNS.PR.K @ $25.00 per share

in a principal trade with the 08 account.


5

Chronology

Date/Time Event

March 1, 2005 • Press Release. • Berry and McQuillen solicited an order to buy 200,000

BNS.PR.K @ $25.00 per share from the client.


March 14, 2005 5:01 p.m.

• BNS.PR.K was listed.

March 15, 2005 8:51:45

• Buy ticket for the client to buy 200,000 BNS.PR.K @ $25.00 was time-stamped by McQuillen.

• The 08 account sold 200,000 BNS.PR.K @ $25.00 to the client.

9:30:00 • BNS.PR.K began trading on TSX; it opened @ $24.25, closed @ $24.00 and reached a high of $24.50.

• The trade between the 08 account and the client for 200,000 shares @ $25.00 did not appear on the TSX trading data.

Profit/Loss

• McQuillen sold a total of 31,400 BNS.PR.K shares over the TSX for the 08 account on March 15, 2005.

• The 08 account crossed 300,000 shares twice (IN buying) with a selling client @ $24.00. These crosses were printed over the TSX on March 15, 2005 at 12:50:46 and 14:36:17 respectively.

• The 08 account received 195,000 shares of the first 300,000 share cross @ $24.00, essentially covering the 200,000 short sale with the buying client.

• The remaining 105,000 shares of the 300,000 share cross were bought by another client (with a trade ticket stamped March 15/03 at 8:48:41).

• The 08 account bought the entire 300,000 shares from the second cross with the selling client executed over the TSX at 14:36:17.

• The profit to the 08 account on the short to the buying client and the subsequent purchase covering the position was $200,000 ($1.00 per share).

6

Solicitation 8 – October 2004 - Brookfield Properties K (“BPO.PR.K”) 8. On October 4, 2004, Berry and McQuillen solicited an order from the client to

buy 600,000 shares of BPO.PR.K @ $25.00 per share.

Trade 7 - October 2004 – BPO.PR.K

7. On October 22, 2004, the client bought 600,000 BPO.PR.K @ $25.00 per share in a principal trade with the 08 account.


• The trade was confirmed as a principal trade conducted on October 22, 2004.

Chronology

Date/Time Event

October 4, 2004

• Press Release.

• Berry and McQuillen solicited an order from the client to buy 600,000 shares of BPO.PR.K @ $25.00 per share.

• Berry called Syndication about an allocation.

10:46:56 • The Buy ticket for the client of 600,000 shares of BPO.PR.K @ $25.00 was time-stamped by McQuillen.

• After a series of discussions, Syndication agreed to give Berry 350,000 shares.

• Berry called the client and told the client “you’re confirmed” on the 600,000 Brookfield.

October 18, 2005 • Final prospectus receipted.

October 21, 2004 • The 08 account received an allocation of 244,000 new issue shares of BPO.PR.K @ $25.00 for settlement October 22, 2004.

• The inventory position for 08 as of October 21, 2004 was long 244,000 BPO.PR.K shares.

7

5:01 p.m. • BPO.PR.K was listed.

• The buy ticket for the client buy of 600,000 shares of BPO.PR.K @ $25.00 was time-stamped a second time by McQuillen.

October 22, 2004 8:42:47

• The 08 account sold the client 600,000 BPO.PR.K @ $25.00.

9:30:00 • BPO.PR.K began trading on the TSX; opening price was $24.40 (the high), closing price was $24.05.

• The trade did not appear on the TSX trading data.

Profit/Loss

• Berry sold short a total of 10,800 shares for the 08 account on the TSX on October 22, 2004.

• The 08 account was short 366,800 BPO.PR.K shares as of close on October 22, 2004 (244,000 allocation minus 600,000 sold to the client plus 10,800 shorted in the market = 366,800 short).

• The 08 account covered the short position until November 30, 2004 when it became long for the first time since incurring the position on October 22, 2004.

• The profit to the 08 account was $235,724. Solicitation 9 – September 8, 2004 - EL Financial Corporation B (“ELF.PR.B”) 9. On September 8, 2004, Berry and McQuillen solicited the client to buy 50,000

shares of ELF.PR.B. @ $25.00 per share. Trade 8 - September 2004 - ELF.PR.B

8. On September 29, 2004, the client bought 40,000 ELF.PR.B @ $25.00 per share in a principal trade with the 08 account.


• The trade was confirmed as a principal trade conducted on September 29, 2004.

Chronology

8

Date/Time Event

Sept 08, 2004

• Press Release.

• Berry and McQuillen solicited the client to buy 50,000 shares of ELF.PR.B @ $25.00 per share.

Sept 20, 2004 • Final prospectus receipted.

Sept 27, 2004 5.01 p.m.

• ELF.PR.B was listed.

Sept 28, 2004 • ELF.PR.B began trading on the TSX; it opened @ $24.95, and closed @ $25.00 with a high of $25.20.

Sept 29, 2004

• At 10:06, Berry called the client to ask if he wanted to sell his ELF.PR.B shares. The client agreed but neither Berry nor the client could remember how many shares the client agreed to buy on Sept 8/04.

• The client and Berry then agreed on 40,000 shares.

10:44:09 • Berry entered an intentional cross for 70,000 @ $25.10 with another Scotia client buying and IN/client selling.

• Trade Blotter showed that the client above sold a total of 53,700 @ $25.10 (13,700 held outside Scotia and the 40,000 shares it agreed to take from Berry).

• There were no buy trades for 40,000 shares @ $25.00 shown on the TSX data.

• There were no trades whatsoever shown on the TSX trading data in ELF.PR.B on September 29, 2004 @ $25.00.

• The trading blotter and confirmation notice show that the client bought 40,000 shares of ELF.PR.B @ $25.00 from Scotia, in a principal transaction on September 29, 2004.

10:47:34 • Berry telephoned the client, confirming the sell of 53,700 @ $25.10.

9

Profit/Loss

The short position in the 08 account was covered by October 15, 2004 at a loss of $10,183.

Solicitations 10 and 11 – June 2004 - CIBC Series 28 Units (“CM.UN”)

10. On June 3, 2004, Berry and McQuillen solicited an order from client 1 to buy 800,000 of CM.UN @ $10.00 per share.

11. On June 3, 2004, Berry and McQuillen solicited an order from client 2 to buy 50,000 shares of CM.UN @ $10.00 per share.

Trades 9 and 10 - June 2004 – CM.UN

9. On June 17, 2004, client 1 bought 100,000 CM.UN @ $10.00 per share through a principal trade with the 08 account.

10. On June 17, 2004, a client 2 bought 50,000 CM.UN @ $10.00 per share through a principal trade with the 08 account.

• The trades were not printed over the TSX.

• The trades were confirmed as principal trades conducted on June 17, 2004.

Chronology

Date/Time Event

June 3, 2004

• Press Release.

• Berry advised Syndication that he may have interest for approximately 500,000 shares.

• Syndication told Berry that to start they could give him 200,000 shares.

• Berry and McQuillen solicited an order from client 2 to buy 50,000 shares of CM.UN @ $10.00 per share.

11:34:32 • Buy ticket for client 2 for 50,000 CM.UN @ $10.00 was time-stamped by McQuillen.

• Berry and McQuillen solicited an order from client 1 to buy 800,000 of CM.UN, which appeared to be replacing shares of another listed preferred share he agreed to sell

10

to Berry @ $24.85 (referred to herein as a “swap”).

• Berry advised client 1, “…I’m gonna put you like just through my stock for…so I’ll put you through for 800, is that OK”.

• Berry advised the client he was “done” for 800,000 shares.

• Berry spoke to Syndication several times and they agreed to an allocation of 700,000 shares.

June 7, 2004 • Final prospectus receipted.

June 9, 2004 • Client 1 was allocated 700,000 shares of the new issue stock from Syndication @ $10.00 (for settlement June 17, 2004). “Prospectus enclosed” was noted on the trading blotter.

June 16, 2004 5:01 p.m.

• CM.UN was listed.

June 17, 2004 8:56:50

• Buy ticket for client 1 for 100,000 CM.UN @ $10.00 was time-stamped by McQuillen.

• The trade date of June 17, 2004 was written by hand on the ticket for client 2 by McQuillen.

• 08 account sold 100,000 CM.UN @ $10.00 to client 1.

• 08 account sold 50,000 CM.UN @ $10.00 to client 2.

9:30:00 • CM.UN began for trading on the TSX; it opened @ $9.70 (the high of the day). Closing price was $9.45.

• Neither trade between the 08 account and these clients appeared on the TSX trading data.

Profit/Loss

• On June 17, 2004, the 08 account sold short a total of 13,900 shares at prices ranging from $9.55 to $9.70 on the TSX.

• At the close on June 17, 2004 the 08 account held an inventory position in CM.UN that was short 163,900 shares (50,000 sold short to client 2 and 100,000 sold to the client 1 and the additional 13,900 sold short over the TSX).

11

• The trading of the 163,900 short position resulted in a profit of $64,418 to the 08 account.

• This calculation of profit does not factor any profit and/or loss amounts resulting from the swap transaction to the 08 account.

Solicitation 12 and 13 – September 2003 – Brookfield Properties H (“BPO.PR.H”)

12. On September 25, 2003, Berry and McQuillen solicited an order from client 1 for 36,800 BPO.PR.H @ $25.00 per share.

13. On September 25, 2003, Berry and McQuillen solicited an order from client 2

for 23,000 BPO.PR.H @ $25.00 per share. Chronology

Date/Time Event

Sept 25, 2003 14:10:37 15:23:21

• Press Release.

• Berry and McQuillen solicited an order from client 1 to buy 36,800 BPO.PR.H. @ $25.00 per share.

• Berry and McQuillen solicited an order from client 2 to buy 23,000 BPO.PR.H. @ $25.00 per share.

• Buy ticket for client 1 is time-stamped twice.

• Buy ticket for client 2 is time-stamped.

October 9, 2003 • Final prospectus receipted.

October 14, 2003 5:01 p.m.

• Trade dates of October 14, 2003 are noted on the tickets.

• Trades to clients 1 and 2 were transacted in the grey market and confirmed to the clients as transacted as of this date.

• BPO.PR.H was listed.

12

Profit/Loss

• The 08 account received no allocation of new issue shares in BPO.PR.H from Syndication.

• On October 14, 2003, the 08 account was short 59,800 shares of BPO.PR.H

as a result of the above transactions.

• The short position in the 08 account was covered by October 17, 2003, resulting in a profit of $12,441.

Solicitation 14 – September 2003 - CIBC Series 27 (CM.PR.E) 14. On September 4, 2004 Berry and McQuillen solicited an order from the client to

buy 150 CM.PR.E @ $25.00 per share.

Trade 11 - September 2003 – CM.PR.E 11. On September 22, 2003, a client bought 150,000 CM.PR.E @ $25.00 per

share in a principal trade with the 08 account.


• The trade was confirmed as principal trade conducted on September 22, 2003.

Chronology

Date/Time Event

Sept 4, 2003 9:28:30

• Press Release.

• Berry and McQuillen solicited an order from the client to purchase 150,000 CM.PR.E @ $25.00 per share.

• A trade ticket for 200,000 CM.PR.E @ $25.00 for client was time-stamped by McQuillen.

Sept 10, 2003 • Final prospectus receipted.

Sept 19, 2003 5:01 p.m.

• CM.PR.E was listed.

Sept 22, 2003 • The 08 account was allocated from Syndication 100,000 new issue shares @ $24.55 for settlement dated September 24, 2003.

13

• The 08 account sold 150,000 CM.PR.E shares @ $25.00 to client in a principal transaction.

9:30:00 • CM.PR.E began trading on the TSX; it opened @ $25.06 and closed @ $25.15.

• The trade between the 08 account and the client did not appear on the TSX trading data.

Profit/Loss

• The 08 account bought a total of 70,100 shares of CM.PR.E throughout the day on September 22, 2003 at an average price of $25.06 on the TSX.

• The 08 account earned a profit of $42,000 from selling 150,000 shares to the client; receiving an allocation of 100,000 new issue shares and buying 70,100 shares in the market.

Solicitations 15, 16 and 17 – June 12, 2003 - Brookfield Properties U (“BPO.PR.U”) 15. On May 22, 2003, Berry and McQuillen solicited an order to buy 10,000

BPO.PR.U shares @ $25.00 per share from client 1. 16. On May 22, 2003, Berry and McQuillen solicited an order to buy 4,000

BPO.PR.U shares @ $25.00 per share from client 2. 17. On May 22, 2003, Berry and McQuillen solicited an order to buy 400,000

BPO.PR.U shares @ $25.00 per share from client 3.

Trades 12, 13 and 14 - June 2003 – BPO.PR.U

12. On June 12, 2003, client 1 bought 10,000 BPO.PR.U @ $25.00 per share in a principal trade with the 08 account.



• None of the trades were printed over the TSX.

• Trades were confirmed as principal trades conducted on June 12, 2003.

14

Chronology

Date/Time Event

May 27, 2003

14.54.53 15:15:54

• Press Release.

• Berry and McQuillen solicited orders to buy @ $25.00 per share as follows:

- Client 1 – 10,000 shares - Client 2 – 4,000 shares - Client 3 – 400,000 shares

- Trade ticket for client 1 for 10,000 BPO.PR.U @ $25.00 was time-stamped by McQuillen.

- Trade ticket for client 2 for 4,000 BPO.PR.U @ $25.00 was time-stamped by McQuillen.

June 4, 2003 • Final prospectus receipted.

June 11, 2003 5:01 p.m.

• The 08 account received an allocation of 341,000 new issue shares in BPO.PR.U @ $25.00 from Syndication.

• The 08 account was long 341,000 shares at the close on June 11, 2003.

• BPO.PR.U was listed.

June 12, 2003 8:33:28

• Buy ticket for client 3 for 400,000 BPO.PR.U @ $25.00 was time-stamped by McQuillen.

• The 08 account sold 10,000 BPO.PR.U @ $25.00 to client 1.



9:30:00 • BPO.PR.U began trading on the TSX; it opened @ $24.50 and closed @ $24.85, with a high of $24.97.

• The trades between the 08 account and the clients did not appear on the TSX trading data.

15

Profit/Loss

• The 08 account was short 73,000 BPO.PR.U shares as of the close on June 12, 2003.

• Neither Berry nor McQuillen traded BPO.PR.U on the TSX on June 12, 2003.

• The short position in the 08 account was covered by December 16, 2003 and resulted in a loss of $5,011.

Solicitations 18 and 19 – March 2003 – Power Financial Corporation J (“PWF.PR.J”)

18. On February 24, 2003, Berry and McQuillen solicited client 1 to buy 15,000 shares of PWF.PR.J @ $25.00 per share.

19. On February 24, 2003, Berry and McQuillen solicited client 2 to buy 13,100 shares of PWF.PR.J @ $25.00 per share.

Chronology

Date/Time Event

February 24, 2003

• Press Release.

• Berry and McQuillen solicited client 1 to buy 15,000 shares of PWF.PR.J @ $25.00 per share.

• Berry and McQuillen solicited client 2 to buy 13,100 shares of PWF.PR.J @ $25.00 per share.


March 5, 2003 • The 08 Account was allocated from Syndication 75,000 new issue shares of PWF.PR.J @ $25.00 per share for settlement March 11, 2003

March 7, 2003 • Both trades were transacted in the grey market and confirmed to the clients as transacted on this date.

March 10, 2003 • PWF.PR.J was listed for trading

16

March 11, 2003 • The 08 Account was allocated from Syndication an additional 2,000 new issue shares of PWF.PR.J @ $25.00 per share

Profit/Loss • On March 7, 2003, the 08 account was long 46,900 shares of PWF.PR.J. • As the transactions with the clients and the allocation to the 08 account were

all priced at $25.00, no profit or loss was incurred. Solicitations 20, 21 and 22 – September 2002 – EPCOR Pfd Equity Series I (“EPE.PR.A”)

20. Between August 15, 2002 and September 13, 2002, Berry and McQuillen solicited client 1 to buy 10,000 shares of EPE.PR.A @ $25.00 per share.



Trade 15 - September 2002 – EPE.PR.A

15. On September 27, 2002, client 3 bought 100,000 shares of EPE.PR.A @ $25.00 per share in a principal trade with the 08 account.


• The trade was confirmed as a principal trade conducted on September 27, 2002.

Chronology

Date/Time Event

August 15, 2002

• Press Release.

• The 08 account received an allocation from Syndication of 105,000 new issue shares of EPE.PR.A @ $25.00 per share for settlement Sept 27, 2002.

August 15, • During this period, Berry and McQuillen solicited an

17

2002 – September 17, 2002

order @ $25.00 per share from client 1 to buy 10,000 shares, from client 2 to buy 100,000 shares and from client 3 to buy 100,000 shares.

September 13, 2002

• Final prospectus receipted.

September 26, 2002

• The trades to client 1 and client 2 were transacted in the grey market and confirmed to the clients as transacted on this date.

September 26, 2002 5:01 p.m.

• EPE.PR.A was listed.

September 27, 2002

9:30 a.m.

• The 08 account sold 100,000 EPE.PR.A to client 3 @ $25.00.

• EPE.PR.A began trading on TSX; it opened @ $25.06 and closed @ $25.07 with a high of $25.25.

• The trade with client 3 did not appear on the TSX trading data.

Profit/Loss

• On September 27, 2002, the 08 account was short 105,000 shares of EPE.PR.A as a result of the client transactions totaling 210,000 shares.

• The short position was covered as of February 27, 2003 at a loss of $16,300.

Solicitations 23, 24, 25, 26, 27 and 28 – September 2002 – Brookfield Property 6% Series F (“BPO.PR.F”)

23. Between September 4, 2002 and September 6, 2002, Berry and McQuillen solicited client 1 to buy 10,500 shares of BPO.PR.F @ $25.00 per share.





18


Chronology

Date/Time Event

September 4, 2002

• Press Release.

September 4, 2002 – September 24, 2002

• During this period, Berry and McQuillen solicited orders @ $25.00 per share from client 1 to buy 10,500 shares, from client 2 to buy 100,000 shares, from client 3 to buy 100,000 shares, from client 4 to buy 100,000 shares, from client 5 to buy 217,300 shares, and from client 6 to buy 60,000 shares.

September 18, 2002

• Final prospectus receipted.

September 24, 2002

5:01 p.m.

• The trades to the 6 clients were transacted in the grey market and confirmed to the clients as transacted on this date.

• The 08 Account was allocated from Syndication of 605,000 new issue shares of BPO.PR.F @ $25.00 per share for settlement September 25, 2002.

• BPO.PR.F was listed.

Profit/Loss

• On Sept 24, 2002, the 08 account was long 17,200 shares as a result of the 6 transactions totalling 587,800 shares of BPO.PR.F.

• As both the transactions with the clients and the allocation to the 08 account were priced at $25.00, no profit or loss was incurred.

Solicitations 29 and 30 – July 2002 – Brascan Corp. CIA A Series 11 (“BNN.PR.I”)

29. Between July 2, 2002 and July 11, 2002, Berry and McQuillen solicited client 1 to buy 200,000 shares of BNN.PR.I @ $25.00 per share.

30. Between July 2, 2002 and July 12, 2002, Berry and McQuillen solicited client 2 to buy 90,000 shares of BNN.PR.I @ $25.00 per share.

19

Chronology

Date/Time Event

July 2, 2002 • Press Release.

July 2, 2002 – July 12, 2002

• During this period, Berry and McQuillen solicited orders @ $25.00 per share from client 1 to buy 200,000 shares and from client 2 to buy 90,000 shares.

July 11, 2002 • Final prospectus receipted.

• The 08 Account was allocated from Syndication 225,000 new issue shares of BNN.PR.I @ $25.00 per share for settlement July 18, 2002

July 12, 2002 • The trades to client 1 and client 2 were transacted in the grey market and confirmed to the clients as transacted on this date.

July 17, 2002 5:01 p.m.

• BNN.PR.I was listed.

Profit/Loss

• On July 12, 2002, the 08 account was short 60,000 shares of BNN.PR.I.

• The short position in the 08 account was covered by July 18, 2002 at a profit of $2,925.

Solicitations 31, 32 and 33 – July 2002 – Power Financial Series F (“PWF.PR.G”)

31. Between June 26, 2002 and July 8, 2002, Berry and McQuillen solicited client 1 to buy 50,000 shares of PWF.PR.G @ $25.00 per share.



20

Chronology

Date/Time Event

June 26, 2002 • Press Release.

June 26, 2002 – July 11, 2002

• During this period, Berry and McQuillen solicited orders @ $25.00 per share from client 1 to buy 50,000 shares from client 2 to buy 20,000 shares, and from client 3 to buy 275,000 shares.

July 5, 2002 • Final prospectus receipted.

July 8, 2002 • The 08 Account was allocated from Syndication 350,000 new issue shares of PWF.PR.G @ $25.00 per share.

• The trade to client 1 was transacted in the grey market and confirmed to the client as transacted on this date.

July 10, 2002 • The trade to client 2 was transacted in the grey market and confirmed to the client as transacted on this date.

July 11, 2002 • The 08 Account was allocated from Syndication 5,000 new issue shares of PWF.PR.G @ $25.00 per share.


July 15, 2002 5:01 p.m.

• PWF.PR.G was listed.

Profit/Loss

• By July 11, 2002, the 08 account was long 10,000 shares of PWF.PR.G as a result of the above transactions.

• Due to a further allocation to the 08 account from Syndication of 5,000 new

issue shares of PWF.PR.G @ $25.00 per share plus a cancellation of a transaction, the 08 account was short 10,000 shares as of July 16, 2002.

• The short position was covered on July 17, 2002 at a profit of $100.

21

Solicitations 34, 35, 36, 37, 38 and 39 – April 2002 – CIBC Series 25 (“CM.PR.C”)

34. On April 4, 2002, Berry and McQuillen solicited client 1 to buy 80,000 shares of CM.PR.C @ $25.00 per share.


36. Between April 4, 2002 and April 5, 2002, Berry and McQuillen solicited client 3 to buy 100,000 shares of CM.PR.C @ $25.00 per share.




Chronology

Date/Time Event

April 4, 2002 • Press Release.

April 4, 2002 – April 8, 2002

• During this period, Berry and McQuillen solicited orders @ $25.00 per share from client 1 to buy 80,000 shares, from client 2 to buy 150,000 shares, from client 3 to buy 100,000 shares, from client 4 to buy 200,000 shares, from client 5 to buy 100,000 shares, and from client 6 to buy 300,000 shares.

April 8, 2002 • The 08 Account received an allocation from Syndication of 1,000,000 new issue shares of CM.PR.C @ $25.00 per share.

April 9, 2002 • Final prospectus receipted.

• The trades to clients 1 through 5 were transacted in the grey market and confirmed to the clients as transacted on this date.

April 10, 2002 • The 08 Account received an allocation from Syndication of 125,000 new issue shares of CM.PR.C @ $25.00 per share.

22

April 16, 2002

5:01 p.m.


• CM.PR.C was listed. Profit/Loss

• By April 16, 2002, the 08 account was long 195,000 shares as a result of the above transactions.

• As the transactions with the clients and the allocations to the 08 account were

all priced at $25, no profit or loss was incurred.

23

SCHEDULE “B”

Excerpts from the Universal Market Integrity Rules

6.4 Trades to be on a Marketplace

A Participant acting as principal or agent may not trade nor participate in a trade in a security by means other than the entry of an order on a marketplace unless the trade is:

(a) Unlisted or Non-Quoted Security - in a security which is not a listed security or a quoted security;

(b) Regulatory Exemption – required or permitted by a Market Regulator to be executed other than on a marketplace in order to maintain a fair or orderly market and provided, in the case of a listed security or quoted security, the Market Regulator requiring or permitting the order to be executed other than on a marketplace shall be the Market Regulator of the Exchange on which the security is listed or of the QTRS on which the security is quoted;

(c) Error Adjustment - to adjust by a journal entry an error in connection with a client order;

(d) On Another Market – on another exchange or organized regulated market that publicly disseminates details of trades in that market;

(e) Outside of Canada – as principal with a non-Canadian account or as agent if both the purchaser and seller are non-Canadian accounts provided such trade is reported to a marketplace or to a stock exchange or organized regulated market that publicly disseminates details of trades in that market;

(f) Term of Securities – as a result of a redemption, retraction, exchange or conversion of a security in accordance with the terms attaching to the security;

(g) Options – as a result of the exercise of an option, right, warrant or similar pre-existing contractual arrangement; or

(h) Prospectus and Exempt Distributions – pursuant to a prospectus, take-over bid, issuer bid, amalgamation, arrangement or similar transaction including any distribution of previously unissued securities by an issuer.

7.7 Restrictions on Trading by a Participant Involved in a Distribution

(5) Prohibited Trading

Except as provided in this section, a Participant, while involved in a distribution, shall not bid for nor purchase the distributed security (or a convertible or underlying security) for its own account, nor solicit purchase orders from clients for a distributed security (or a convertible or underlying security).

10.3 Extension of Responsibility

(1) A Participant or Access Person may be found liable by the Market Regulator for the conduct of any director, officer, partner, employee or individual holding a similar position with the Participant or Access Person and be subject to any penalty or remedy as if the Participant or Access Person had engaged in that conduct.

(4) Any officer or employee of a Participant or Access Person or any individual holding a similar position with a Participant or Access Person who engages in conduct that results in the Participant or Access Person contravening a Requirement may be found liable by the Market Regulator for the conduct and be subject to any penalty or remedy as if such person was the Participant or Access Person.

2

Date post:	29-Oct-2019
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

Notice to Public - Investment Industry Regulatory ...€¦without further notice to you and in your...

Documents